Multi-level Marketing, or MLM, may be a marketing strategy which creates a down line of distributors and a hierarchy of multiple levels of compensation. The sales department is compensated not just for their own sales but also for the sales of the people they assist recruit. Firms, having an outsized product base, often cannot employ equivalent sales force; and believe they might be happier without the normal approach. Hence, they implement MLM to survive competition from multi-nationals.
MLM is additionally referred to as Network Marketing because it utilizes a network of individual customers to hit other potential customers. In other words, every individual customer is a sales representative.
Multi-Level Marketing Vs. Pyramid Marketing
People often confuse MLM with pyramid marketing; however there’s very clear distinction between the 2 approaches: pyramid marketing is about getting your money than using you to recruit other distributors; MLM, on the opposite hand, is about moving the merchandise through a bigger network of distributors in order that the business can increase sales volume.
Another difference between MLM and pyramid marketing is that Pyramid marketing requires each level to DOUBLE before a replacement level is made so it is not fair to people lower down within the levels and unethical. MLM, however, awards a commission based upon the quantity of product sold through own sales efforts also as that of the down line organization.
Since MLM faces the risks of initiating a business that has not been tested by the purchasers is not recognized, people like better to wait a few of years before joining. Hence, they also witness the company’s track-record and reliability.